Daylight Resources Trust

Daylight Resources Trust

October 21, 2008 03:33 ET

Daylight Resources Trust Announces West Central Property Acquisition and Farmin on Over 40 Gross Sections of Land in Core Elmworth and Peace River Arch Areas

CALGARY, ALBERTA--(Marketwire - Oct. 21, 2008) - Daylight Resources Trust ("Daylight" or the "Trust") (TSX:DAY.UN) is pleased to announce a combined West Central property acquisition and farmin on over 40 gross sections of land in our core Elmworth and Peace River Arch area. The West Central property acquisition includes approximately 2.0 million barrels of oil equivalent ("boe") of Proved plus Probable ("P + P") reserves and current production of approximately 550 barrels of oil equivalent per day ("boe/d"). This combined acquisition and farmin has been entered into with Midnight Oil Exploration Ltd. ("MOX") and provides a very significant increase to Daylight's Cadomin and uphole Cretaceous natural gas prospect inventory within the Trust's West Central, Elmworth and Peace River Arch land base.

This significant transaction is an excellent fit with Daylight's current assets, technical expertise and counter-cyclical inventory building strategy which provides excellent value with tremendous upside potential for Daylight. Daylight proactively targeted this opportunity to obtain assets that best fit the organization's geographic focus and expertise. At closing, scheduled to be on or before October 31, 2008, Daylight will issue 3.75 million Daylight units and pay $2.0 million to MOX for the West Central asset with an effective date of October 1, 2008. The West Central property acquisition and related issuance of Daylight units is subject to customary conditions including regulatory approval. Based on the 5 day weighted average price of $6.92 per Daylight Unit this represents a total acquisition value of approximately $27.9 million. By executing this transaction primarily with equity, Daylight has preserved its balance sheet capacity to allow the Trust to pursue significant additional strategic opportunities with cash. Farmin drilling will commence during November 2008 with full farmin earning expected to be completed by March 31, 2008 at an estimated net capital cost of $30 million.


In addition to the reserves and production additions detailed above, Daylight is acquiring over 20 additional net sections of land and increasing the working interest of our existing West Central drilling inventory, which includes locations in the Pine Creek and Kaybob areas. The Pine Creek area has been one of Daylight's core development properties since inception of the Trust, with multi-zone opportunities throughout. The Kaybob area has been very active recently for Montney horizontal gas development. The acquired Kaybob lands are highly complementary to Daylight's Montney potential in the area, including an increase to Daylight's working interest in our operated Fox Creek Montney B pool, currently being assessed for horizontal downspacing.

Production and reserve addition metrics are as follows:

- Adds 550 boe/d of production at approximately $50,700 per flowing boe/d

- Increases P + P reserves by 2.0 million boe at approximately $13.95 per boe


Elmworth has been Daylight's key property over the last 18 months. The Trust has targeted this area for significant investment of capital which has generated strong reserve additions and production success in the Cadomin and uphole Cretaceous zones. At Elmworth, Daylight will pay 75% of the costs through completion to earn a 45% interest in 3 earning farmin wells. This will result in Daylight earning a 45% interest in 6 gross sections of prospective lands. At the 3 wells per section anticipated to develop these lands, the remaining inventory after completion of the farmin commitment would be 14 gross (6.3 net) wells. This will increases Daylight's remaining drilling inventory at our Elmworth property to 54 gross (35.2 net) wells. Estimated net capital cost for the earning farmin wells at Elmworth is $13 million.


The Bilbo area is geologically similar to Elmworth with proven production from the Cadomin and several uphole Cretaceous zones nearby. Daylight believes that the horizontal drilling and multi-stage completion technologies successfully applied at Elmworth can also be applied at Bilbo. Daylight will pay 50% of the costs through completion at Bilbo to earn a 30% interest in 6 earning farmin wells. This will result in Daylight earning a 30% interest in 36 gross sections of prospective lands. At the 2 wells per section estimated to develop these lands, the remaining inventory after completion of the farmin commitment could be as many as 66 gross (19.8 net) wells. There is a further option to earn a 30% interest in an additional 6 gross (1.8 net) sections of land by paying 50% of the capital cost of an additional earning farmin well. Estimated net capital cost for the 6 initial earning farmin wells at Bilbo is $17 million.


This highly synergistic combined acquisition and farmin adds very solid base production that Daylight currently operates in the West Central area and increases our inventory of repeatable, low-geological risk drilling opportunities at Elmworth. The Bilbo farmin provides a significant new contiguous land block with development opportunities and exploration upside. Daylight's technical expertise and experience with horizontal drilling and multi-stage completion technologies is expected to generate significant reserve additions and new production within the West Central, Elmworth and Bilbo areas. Daylight will update our 2008 capital and production guidance subsequent to the closing of this transaction.


Forward Looking Statements: This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "believes", "expects", "intends", "projects", "plans", "anticipates", "positions", "potential", "objective", "continuous", "ongoing", "estimates" or "contains" or similar words or the negative thereof. In particular, this press release contains forward-looking statements relating to:

- anticipated closing of combined West Central property acquisition and farmin transaction;

- anticipated commencement of farmin drilling, expected completion date for earning farmin wells and associated estimated net capital costs for the earning farmin wells at the Elmworth and Bilbo properties;

- anticipated production and reserve additions together with related cost per boe and cost per flowing boe/d associated with West Central property acquisition;

- anticipated drilling inventory of gross and net wells, prospects, drilling opportunities and upside following completion of earning farmin well commitments at the Elmworth and Bilbo properties;

- estimated number of additional wells required to develop the Elmworth and Bilbo properties;

- the transaction's fit, complement, synergy, value and upside potential for Daylight; and

- the successful application of horizontal drilling and multi-stage completion technologies to the West Central, Elmworth and Bilbo assets.

These statements represent management's expectations or beliefs concerning, among other things, future capital expenditures and future operating results and various components thereof or the economic performance of Daylight and include, without limitation, statements with respect to the future financial position, business strategy, budgets, projected costs and plans, objectives of or involving Daylight or any of its respective affiliates; amounts to be retained by Daylight for growth; the amount and timing of the payment of distributions of Daylight; payout ratios; access to credit facilities; capital taxes; income taxes; commodity prices; administration costs; commodity price risk management activities; expectation of future production rates and components of cash flow and earnings. Actual events or results may differ materially. The projections, estimates and beliefs contained in such forward-looking statements are based on management's estimates, opinions and assumptions at the time the statements were made including assumptions relating to the production performance of Daylight's oil and gas assets, the cost and competition for services throughout the oil and gas industry in 2008 and beyond and the continuation of the current regulatory and tax regime in Canada, and necessarily involve known and unknown risks and uncertainties which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted. Daylight does not undertake to update any forward-looking information contained in this press release whether as to new information, future events or otherwise except as required by securities rules and regulations.

Barrels of Oil Equivalency: Barrels of oil equivalent (BOE's) may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio for natural gas of 6 Mcf:1bbl has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information